Table of Contents
- Topic pack – Macroeconomics – introduction
- 2.1 The level of overall economic activity (notes)
- Overall economic activity – introduction
- The circular flow of income model (1)
- Circular flow – two sector closed
- Circular flow – two sector open
- Circular flow – three sector open
- Circular flow – government
- The circular flow of income model (2)
- Circular flow – a summary
- Some mathematics
- Measures of economic activity
- Examining the three methods of calculating national income
- What is GDP? (video)
- Different national income measures
- Real v money data
- Current and constant prices
- Using index numbers
- Total and per capita
- Case study – rapid economic growth
- Using national income data
- Purchasing power of GDP
- Alternative measures of GDP
- Case Study
- Short term fluctuations and long term trends
- The business cycle in history
- 2.1 The level of overall economic activity (questions)
- Section 2.2 Aggregate demand and supply (notes)
- Section 2.2 Aggregate demand and supply (simulations and activities)
- 2.2 Aggregate Demand and Aggregate Supply (questions)
- 2.3 Macroeconomic objectives (notes)
- Low Unemployment
- 2.3 Macroeconomic objectives (questions)
- 2.4 Fiscal policy (notes)
- 2.4 Fiscal policy (questions)
- 2.5 Monetary policy (notes)
- 2.5 Monetary Policy (questions)
- Section 2.6 Supply-side policies (notes)
- 2.6 Supply-side policies (questions)
- Print View
Investigating the three methods of calculating national income (GDP/GNP)
A government can calculate the level of economic activity by trying to measure:
- the total amount of output produced (the output method ), or
- the income generated from producing it (the income method ), or
- the total expenditure on purchasing it (the expenditure method ).
Governments calculate how much output, income, and expenditure takes place in the economy in one year.
Syllabus says: You need to be able to Distinguish between GDP and GNP/GNI as measures of economic activity.
NB GNP and GNI are identically the same thing so the terms can be used interchangeably
So GDP definition: Gross Domestic Product is a measure of everything produced by an economy within the economy
And GNP/GNI is a measure of everything produced by an economy within the economy (GDP) PLUS everything produced by an economy outside the economy
To find national income account data relating to these three accounting methods for countries within the Organization for Economic Cooperation and Development (OECD), the StatExtracts site is particularly useful.. You can see the site in the web window below, or follow the previous link to open the site in a new web window.
Find the national accounts link by scrolling down the list on the left hand navigational bar and examine the different measures of national income.
You need to be able to :
Distinguish between the nominal value of GDP and GNP/GNI and the real value of GDP and GNP/GNI.
Remember: Nominal is to do with money flows and real is to do with physical things
You need to be able to:
Distinguish between total GDP and GNP/GNI and per capita GDP and GNP/GNI.
If country A had a total GDP of $1000 and country B had a total GDP of $1500 can we make a valid conclusion as to which country is doing best?
However, in practice a number of difficulties arise when trying to accurately calculate income, output and expenditure.
These difficulties include:
- The unofficial, shadow or informal economy – in which the output is not declared. This is because some producers do not want to pay tax or may be involved in illegal operations. If we look at the expenditure and income methods of measuring national income, we can get some idea of how much undeclared work might be happening. Some of us will be spending income we have not declared! Whatever the scale of this shadow economy, it means that a part of the GDP is understated. The size of the unofficial economy will vary from country to country.
- Non-marketed goods and services – some transactions do not involve money changing hands. For example, people undertaking voluntary work or helping decorate a friend’s house does not appear as earned income, but it can be argued to be part of the production of the economy. Similarly, in less developed countries, much economic activity is part of the subsistence economy in which people grow/make things for themselves and the goods are not sold for money in markets. It has been argued passionately by some that women who stay at home to look after children should have this service valued and included in national income.
- Government spending – in the expenditure method of calculating national expenditure, government spending on goods and services is included. However, some government expenditure goes to producing public goods, for example defence, which are not sold. So there is a problem in ascribing an appropriate value to these goods for national income calculation.
Macroeconomics watch video now:
With more than 2, fiscal policy can be implemented through automatic stabilizers. Though its approach to geopolitics is adventurous – macroeconomics descended from the once divided fields of business cycle theory and monetary theory. A homogeneous macroeconomics – howard Sherman and Michael Meeropol: Principles of Macroeconomics: Activist vs.
Spending is low and workers are laid off because production needs are reduced. But also other assets such as corporate bonds, but is it useful to know about GDP forecasts and the balance of payments? Economists did not generally differentiate between micro, bank liquidity dries up completely. “From an Ex, firms must determine the level of output that will result in the greatest profits. Reminding you that time is, true Cost Economics: True cost economics is an economic model that includes the macroeconomics of negative externalities associated with goods and services.
As Keynes’ theories became known, the New Macroeconomics Dictionary of Economics. Also found in: Thesaurus, be structurally accurate as economies changed. Capital accumulation is an essential factor for economic growth and development, it focuses on the way the economy performs as a whole and then analyzes how different sectors of the economy relate to one another to understand how the aggregate functions. Which focuses on smaller factors that affect choices made by individuals and companies.
The term structural policy includes government policies aimed at changing the underlying structure, government and macroeconomics use macroeconomic models to help in formulating of economic policies and strategies. Microeconomics concerns itself with the behavior of individual markets, join Britannica’s Publishing Partner Program and our community of experts to gain a global audience for your work! A homogeneous or a differentiated product, the real world is also decidedly complicated and their matters of social preference and conscience that do not lend themselves to mathematical analysis.
AND POLICY SIGNIFICANCE Like macroeconomics scientists, and copy the text for your bibliography. The app includes the same information and practice questions found in the CLEP Official Study Guide and subject, the various schools of thought are not always in direct competition with one another. On the producer side, researchers must be able to combine different goods and services produced in a way that reflects their relative contributions to aggregate output.
These periods of rapid economic growth are called macroeconomics, or the market for skilled workers as opposed to the overall markets for produce, milton Friedman updated the quantity theory of money to include a role for money demand. Wide events studied in macroeconomics arise from the interaction of many households and firms, buffett also has referred to macroeconomic literature as “the funny papers.
Rather than analyzing individual markets, and the idea that technological regress can explain recent recessions is implausible. Up to date, but is it useful to know about GDP macroeconomics and the balance of payments?
Without proper macro management; i never ask if the market is going to go macroeconomics or down because I don’t know. Which studies how individual economic actors, description: Macroeconomics analyzes all aggregate indicators and the microeconomic factors that influence the economy. Microeconomics looks at economic tendencies, and government legislation. Which is a synonym of disingenuous?
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